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Reports UK

UK stock market commentary (July 16, 2014): Hawks circling above wounded bulls

July 16, 2014, Wednesday, 05:20 GMT | 00:20 EST | 08:50 IST | 11:20 SGT
Contributed by Capital Spreads

European equities are set edge higher on the open as Chinese GDP comes in just above expectations. Traders are able to breath easy that the wobbles in the Chinese economy are just that, and for now at least traders are content with a stable growth rate from the worlds 2nd largest economy.

Despite the positive open, UK traders have the jitters ahead of the unemployment data. Yesterdays surprise rise in inflation caused all the hawks to chirp up about an early rate rise again. If today’s unemployment data compliments that view point by surprising to the downside, then expect their calls to reach deafening levels. Mark Carney has always stressed that monetary tightening will be “driven by the data” so expect today’s sentiment to be derived from how long or short the dole queues are.

Better than expected results for the US banking sector, surprised the markets and triggered a rally led by JP Morgan Chase and Goldman Sachs. In addition, retail sales remained resilient helping the economic growth. So the Dow Jones gained another 20 points to 17,073 but investors will be interested to read through the Beige Book report due later today for the latest details on the state of the economy.

Federal Reserve Chair Janet Yellen pointed out that interest rates could rise sooner than initially estimated if the labour market keeps improving at a faster pace. In reaction, investors rushed into the greenback and in turn discarded the common currency especially when the German Zew Economic sentiment was weaker than forecast. The EUR/USD pair ended 50 pips down at 1.3569.

As mentioned in yesterday’s oil report easing concerns over tensions in Iraq and Libya took their toll, putting further downside pressure on the WTI crude prices. So yesterday we saw a slump into the double digits area but a late rebound just about pushed the market price above the psychologically important $100.00 mark. Overall the WTI crude lost 78 cents to $100.19.

The prospects of hiking US interest rates sooner than predicted, acknowledged by Fed Chair Janet Yellen strengthened the dollar and in turn hurt gold prices. As a result the precious metal plunged below $1300.00 dropping $14.00 in the process to finish at $1293.9.